subject: Learning Profitable Forex - What Two Indicators Should the Best Forex Systems Provide You? [print this page] Learning Profitable Forex - What Two Indicators Should the Best Forex Systems Provide You?
Everyone wants the best forex system - after all, the whole point in trading is to make money, right? And the best way to make money is to have a very profitable trading system that does most of the heavy lifting for you. Sure, once you have gotten some experience under you belt, you will need to rely less on software products and systems. But as a beginner who is just learning the ropes of foreign currency exchange, having a proven set of guidelines to follow will help you master this unique investing without losing your shirt.
So it makes sense that the best forex system will be the most developed and complicated, right? Wrong!
The best forex system is usually the simplest. It is totally natural for newbie traders to add every kind of indicator to their chart. You might add trendlines, support and resistance, simple moving averages, weighted moving averages, stochastics, RSI, Fibonacci levels, oscillators, fractals - you want to add everything.
I have seen some trading systems so complicated that you could barely see the price because of all the indicators. Traders swore that they needed every indicator and that each indicator had its own purpose, but when you ask them how much money they make with all of those indicators, they can rarely say they are profitable. You see, it is not how many indicators that you use, it is how well you know the indicators that you use.
So let me point you in the right direction on which indicators you should use as the basis for your forex trading system. There are only two indicators you need to make money, and once you get good enough, you won't even need them. The best forex system always contains these two indicators.
1. Support and resistance
Support and resistance are levels that the market reaches before it turns around. If the market is moving up and then suddenly changes direction, the market has just met resistance. If the market is moving down and suddenly changes direction, it has just created a support level.
You see, the market doesn't move on accident. For the market to move even just a little bit, somebody must invest millions of dollars. So when the price suddenly turns around, that means that someone (i.e. corporation, government, etc.) had enough conviction to spend millions of dollars to turn the market.
You need to pay attention to these support and resistance levels. Why? Because the next time the market reaches that level, you want to be ready. Maybe the market turns again, maybe it doesn't. Either way, you can make money.
2. Moving averages
Every professional trader uses moving averages. The most popular is the 200 simple moving average - professional traders use this one all of the time.
A moving average is simply an average of the market price. Rather than looking at all the minor moves in price, a moving average shows you the overall trend. The forex market trends more than any other market in the world, so when prices are moving in one direction (i.e. the moving average is pointed strongly up or down), you want to trade with the market. Don't every try to trade against it!
The best forex system is one that provides you with these critical indicators. Contrary to popular belief, starting off with a forex system that has all the bells and whistles may not be ideal for those just learning to invest in the foreign exchange market. Having too many options and indicators will mostly likely confuse novice investors rather than assist them. To start off, simple systems and guidelines work best.
